A U.S. bankruptcy judge has approved an order allowing Kentucky hemp processing company GenCanna Global USA Inc. to sell off its inventory, intellectual property, and licenses to MGG GenCanna Acquisition Group, Law360 reports. The deal also involves a credit bid of $73.5 million, which MGG lent to GenCanna both prior to and after the company filed the bankruptcy petition.
MGG will also pay another $3.5 million in cash, the report says.
GenCanna filed for bankruptcy in February after accusations of non-payment to contractors – and at least one lawsuit by a contractor seeking payment – layoffs at the company in January, and claims that the firm violated contracts and sent low-quality hemp seed which led to more lawsuits.
According to court documents outlined by Law360, MGG is receiving nearly 15,000 bales of hemp as part of the deal. GenCanna will keep 13 vehicles and at least a few of its properties, the report says.
U.S. Bankruptcy Judge Gregory Schaaf last week overruled claims by Bragg Farms & Co, who objected to the sale, over $2 million it is owed by GenCanna for about 1,700 bales of hemp. Schaaf said the farm had no lien on the property and was an unsecured creditor.
In signing off on the order, Schaaf said it was the “best deal” GenCanna would get.
The judge’s approval is likely just the beginning of the process after the U.S. Trustee’s Office on Monday filed a motion asking to convert the case to a Chapter 7 after GenCanna let its insurance lapse for a $4 million property and a greenhouse it has in Paris, Kentucky.
GenCanna’s unsecured creditors may also seek litigation against MGG to resolve their claims, and the official committee of unsecured creditors has filed a motion asking the judge to grant it standing to prosecute and settle its claims. That motion is expected to be heard next month.